The Labour government has made the winter fuel payment mean-tested affecting the benefit eligibility. Many campaigners or experts say the government may mean-test the state pension next year.
Rachel Reeves Means Test State Pension
Rachel Reeves, the newly appointed Chancellor of the Exchequer responsible for the government growth mission, oversees the monetary framework and has played a key role in the UK government mean-testing the energy benefit Winter fuel payment. Winter fuel payments linked to pension credit affected the eligibility of the pensioners.
Millions of pensioners become ineligible for the payment this winter due to changes in WFP. With the cut in WFP, the director of Pensioner Charity has warned that the next in line will be free bus passes, followed by the State Pension. Many leading charities predict the government will slash support from pensioners. This weekend PM and DWP secretary revealed to cut down the UK welfare bill.
The State Pensions in the UK are available to retirees who reached the State Pension age. The government increases the State Pension every year based on CPI and the average wage percentage in the UK. The government has confirmed to hike the State Pension through triple lock but the mean-testing of the State Pension can change many things for pensioners.
What would change if the State Pension will be mean-tested?
The means-tested benefits mean the government will offer benefits to households or individuals whose income or capital is below the set threshold. So, let’s see how the State Pension would change if it got mean-tested.
- The current eligibility for the State Pension involves a man born on or after 06 April 1951 and a woman born on or after 06 April 1953 for the basic pension and people who have contributed enough National Insurance. The eligible UK resident may also receive the additional State Pension (top-up); however, with the mean-tested State Pension, other criteria like income and resources may also join the eligibility factor of the State Pension.
- With the eligibility factor, some pensioners may be ineligible for the pension.
- Your State Pension payment changes due to the National Insurance record or other factors may remain the same or change.
- Currently, under the State Pension, the pensioners receive £221.20 weekly, however, if the State Pension counts as a means-tested benefit, the payout can be reduced from earlier, though the government has planned to increase the State Pension annually with the triple lock.
What is the probability of State Pension to be mean-tested?
The probability of the government mean-testing the State Pension is slightly low as the government has not hinted anything about this provision, though the government has hinted at cutting the welfare bills of the country to save the treasury.
The Labour Government has also promised to ensure the triple lock hike in State Pensions next year, which means the pensioners can expect a hike either through 2.5% inflation or earning growth, like this year, the payment was hiked from £203.85 to £221.20 a week. Recently, the government has confirmed the full state pension hike of £472 in April 2025.
On the other hand, the State Pension is part of the welfare system, and making it mean-tested would involve several administrative or other changes that could raise problems. According to experts, the government should neither make it means-tested nor earning-related and focus on enhancing the structure.
Rachel Reeves plan for new pension bill
Recently Rachel Reeves unveiled her new pension bill to merge local government retirement plans with Canada-style mega funds. As per the plan, the Chancellor plans to pool assets from LGPS (Local Government Pension Schemes) in eight megafunds worth £50 billion till 2030 in Wales and England.
The Chancellor aimed to follow up with the other countries’ success in delivering pension benefits to the citizens through such practices as the larger funds being managed by professional investors. So, with the new plan, the Chancellor indicated the megafunds would be used to invest the money into the UK’s business, infrastructure projects, and others because it would help cut costs and fees for advisers, lawyers, etc.
The government believes the UK projects and businesses would get investment this way which would be beneficial for the country’s economy as well the pensioners can get profit from the investment.
The Labour government has not announced anything related to the mean-testing of the State Pension, however, it’s clear the government planned several changes in the State pension and other welfare benefits in the coming year.
